New York, January 05, 2021 -- Moody's Investors Service (Moody's) has affirmed the long- and
short-term ratings and assessments of SVB Financial Group (SVB,
long-term senior unsecured A3) and of its lead bank, Silicon
Valley Bank (long-term deposits Aa3), including its a2 standalone
Baseline Credit Assessment (BCA), following SVB's announcement
that it has agreed to acquire Boston Private Financial Holdings,
Inc. (Boston Private). The rating outlook remains stable.
Affirmed:
..Issuer: Silicon Valley Bank
.... Baseline Credit Assessment, Affirmed
a2
.... Adjusted Baseline Credit Assessment,
Affirmed a2
.... Long-term issuer rating,
Affirmed A3, Stable
.... Long-term deposit rating,
Affirmed Aa3, Stable
.... Short-term deposit rating,
Affirmed P-1
.... Long-term Counterparty Risk Assessment,
Affirmed A1(cr)
.... Short-term Counterparty Risk Assessment,
Affirmed P-1(cr)
.... Long-term Counterparty Risk Rating,
Affirmed A2
.... Short-term Counterparty Risk Rating,
Affirmed P-1
Issuer: SVB Financial Group
.... Long-term issuer rating,
Affirmed A3, Stable
.... Senior unsecured debt rating, Affirmed
A3, Stable
.... Senior Unsecured Shelf, Affirmed
(P)A3
.... Subordinate Shelf, Affirmed (P)A3
.... Pref. Stock Non-cumulative
Stock, Affirmed Baa2(hyb)
.... Pref. Stock Non-cumulative
Shelf, Affirmed (P)Baa2
..Outlook Actions:
Issuer: Silicon Valley Bank
.... Outlook, Remains Stable
Issuer: SVB Financial Group
.... Outlook, Remains Stable
RATINGS RATIONALE
The rating action follows SVB's announcement that it has agreed
to acquire Boston Private in an 80% stock, 20% cash
transaction. Boston Private, with $9.4 billion
in assets, had $7.2 billion of loans and $16.3
billion of assets under management as of 30 September 2020. The
acquisition, expected to close in mid-2021, will add
private banking and wealth management capabilities to SVB's existing
product suite.
Moody's stated that the affirmation of SVB's ratings reflects
its view that the transaction will not materially change SVB's comparatively
strong credit profile, which is positioned one notch above the US
bank median. The transaction is relatively small at 10%
of SVB's total assets as of 30 September 2020. Even so,
the acquisition will modestly reduce SVB's capital and liquidity
ratios and does bring modest operational and integration risks.
Boston Private's loan portfolio will be 16% of the combined
loan portfolio based on 30 September 2020 data. Notably,
Boston Private's loan portfolio has a commercial real estate (CRE)
concentration with CRE loans accounting for a high 3.0x its Moody's-calculated
tangible common equity (Moody's TCE) base at 30 September 2020.
This concentration level is among the highest of Moody's-rated
banks and a concern as the economic fallout from the coronavirus pandemic
is not yet fully known. However, because of its smaller size
and SVB's small CRE portfolio, we expect SVB's CRE portfolio
to remain small following the acquisition at an estimated 0.4x
its pro forma Moody's TCE. Furthermore, SVB's
due diligence included a detailed loan file review of 75% of Boston
Private's commercial commitments and the acquisition carries a 2.25%
credit mark.
SVB's specialized business model focuses on key sectors including venture
capital, private equity, technology and life science.
As such, its loan portfolio lacks diversification with significant
industry concentration to venture capital, private equity,
technology and life science, which together accounted for 81%
of its total loans as of 30 September 2020. Boston Private will
bring a sizeable amount of assets under management to SVB's existing,
but small, wealth management business. In addition,
the acquisition will augment product offerings and lending capabilities
in SVB's private bank and wealth management business which over
time could drive increased revenue and loan diversification by asset class
and geography, benefiting SVB's credit profile.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Meaningfully slower loan growth and reduced sector and borrower concentrations
could lead to upward rating pressure provided that SVB's strong
financial fundamentals are maintained.
SVB's BCA and ratings could be downgraded if missteps in the integration
of Boston Private occur or if there was a sustained decline in its capitalization
or liquidity position inconsistent with Moody's current expectations.
Evidence of weakening in underwriting standards would also add downward
rating pressure.
The principal methodology used in these ratings was Banks Methodology
published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Megan Fox
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
M. Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
